Impact Investing Discussions Suggest Economic Returns And Social Impact Can Be Achieved Together

World leaders converged on the Beverly Hills Hilton this week to discuss the big issues facing us today. Among the topics discussed at the Milken Institute Global Conference was impact investing, which is where I focused my energy during the conference.

In one session, Dave Chen of Equilibrium Capital Group, En Lee, of Impact Investment Exchange Asia, Sari Miller of Leapfrog Investments and Eytan Stibbe of Vital Capital participated in a panel discussion led by Betsy Zeidman, an Adjunct Fellow at the Milken Institute.

You can watch the entire session here:

Zeidman defined impact investing as “Any investment that includes impact as an intentional part of the investment thesis.” She added that impact investments include a broad range of approaches, including a return of capital to “shooting for the moon,” noting that they can be in “any asset class, any sector and in emerging or in developed markets.”

Stibbe noted that housing is a key need in the developing world and that his fund invested actively in housing in Africa, partnering with governments there.

He went on to say that “any investment in Africa is risky,” then added that “the population wants us there.” His goal in investing in Africa is to offer something to the market that either doesn’t exist or that they can offer at half the price—or less—of the competing products currently offered in Africa.

Stibbe further explained that Vital Capital complies fully with the GIIRS (Global Impact Investing Ratings System) standards for measuring impact. He noted that his fund has provided the equity for $2 billion of housing in Africa with huge impacts on the local economies.

Miller noted that LeapFrog seeks returns in the “top quartile” of private equity funds with the caveat that “we haven’t had an exit, yet.” She acknowledged that “this is a long-term process.” LeapFrog invested in a company that provides life insurance to HIV patients in Africa, which has the effect of giving them access to a variety of economic opportunities because life insurance is often a criterion for credit. The company becomes actively involved in helping HIV patients to stay on their meds with the result that they have measured significant improvement in the health of their insurance customers over time.

Lee was asked about the difference between all venture funds and impact investors, with the questioner noting that all venture funds would claim to have economic impacts. Lee responded that the key difference is “intentionality.”

Chen added “authenticity” to Lee’s comment. He also noted that “If you ignore social issues you increase the risk in your portfolio.” He further explained the increasing importance of “outcomes based securities.”